Allianz Trade Insolvency Report

Allianz Trade does not expect a tsunami of business insolvencies as recorded in the aftermath of the great financial crisis, when global insolvencies skyrocketed by +17% and +19% in 2008 and 2009, respectively. However, the catch-up should be noticeable in several countries, in particular the advanced economies of Europe, due to specific firms (the most exposed to profitability and financing issues) and specific sectors (notably B2C related sectors and construction).

Allianz Trade thus identify 5 reality checks for companies in the years to come:

1. A profitability squeeze is looming. Before benefiting from the global recovery in sight for 2025, firms will have to manage the deceleration in global demand. In several countries, the level of activity is unlikely to reach the minimum required to at least stabilize the number of insolvencies. According to Allianz Trade, the Eurozone and the US would both need +0.7pp in additional GDP growth on average in 2024-2025 to stabilize their number of insolvencies.

2. Uncertainty is on the rise, from geopolitics to rising non-payment risk. After a series of shocks in recent years, the packed election calendar in 2024 will add to economic uncertainty as countries that account for 60% of global GDP head to the polls. This context will add a layer of complexity and risk to business operations, by making it challenging for firms to make accurate forecasts and business plans, and creating volatility in input costs. Moreover, regulation is also on the rise, which may force firms to make costly additional efforts to comply. Our non-payment risk score based on our proprietary credit exposure reveals that firms are getting more and more concerned by non-payment, with the index being at its highest level since 2022.

3. Financing and liquidity conditions are still tight. Firms will continue to face costly financing, maintaining concerns on their capability to absorb the costs of borrowing and mitigate the pressure on overall profitability. At the same time, the limited availability of financing will put the most exposed sectors and firms at risk while the number of fragile firms remains noticeable in the UK (15%), France (14%), Italy (9%) and Germany (7%).

4. New businesses will face their first real resilience test. We expect the post-pandemic acceleration in business creation to push up the 'natural' rise in business insolvencies. In Europe, new business registration proved to be +14% higher in 2021-2023, compared to 2016-2019. For those firms, 2024 will be the first 'true' test of resilience, especially in countries that saw the newest businesses being established, notably France (+47%), the Netherlands (+28%) and Belgium (+14%).

5. Some sectors pose higher risks to jobs and the wider economy. The sectors and firms most exposed to the risks of weaker-for-longer demand and prolonged high financing costs are those that rely on discretionary spending (manufacturing and retail of non-essential goods, hotels, restaurants, tourism and other leisure activities) and labor-intensive ones (construction, road transportation, hotels, restaurants, health care, specific business services). Construction and real estate, which already experienced noticeable jumps in Europe and Asia in 2023, will boost national numbers of business insolvencies due to the cyclical downturn and for business demographic reasons. The continuation of the most recent pace would mean over 16,000 firms going bust in France, over 7,000 in the UK, close to 4,000 in Germany and 2,000 in Italy.

Want to check all our insolvency forecasts and analysis? Take a look at our 2024 Allianz Trade Insolvency Report!